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My Lords, it is a great pleasure to wind up for the Opposition on this important Bill. Although I may be regarded as a newcomer to pension policy I remind the House that I was a Minister at the Department for Work and Pensions from 2005 to 2007, which was a very interesting time because we had the second report of the Pensions Commission and the Government’s White Paper in response. I start by paying tribute to the commission, to the noble Lord, Lord Turner, to Mr Hills and, of course, to my noble friend Lady Drake for the outstanding work that the commission did.
I made a Statement to the House on
My noble friend Lord McKenzie suggested in his opening remarks that too much has happened in the pensions arena in recent times to damage confidence in savings and pensions, including the mis-selling of what should have been enhanced annuities and the U-turn on the secondary annuities market. As the noble Baroness, Lady Bakewell, pointed out, we have just had the call from the head of the Pensions Advisory Service for companies to be banned from cold calling pensioners because of the activities of scammers. Of course, more general underlying concerns continue about the low level of savings and the poor returns for so many savers. Added to this we have the state pension age extension.
The Minister talked about mitigation measures in his opening remarks but, as my noble friend Lady Hollis pointed out, the issue is severe, particularly for women without an occupational pension. My noble friend went on to raise the huge disparity in longevity and morbidity by socioeconomic status. My concerns have been more on the health side than the pensions side, but she is absolutely right: we cannot consider health in isolation. The plight of women, in particular, who are doubly disadvantaged—in health and wealth—deserves recognition and action. I thought that my noble friend’s critique of government policy on occupational pensions was telling and I look forward to the Minister’s response. I look forward to the Minister’s response, also, to the point made in the gap by the noble Viscount, Lord Trenchard, on the perils of early withdrawal from pension funds, and to his response to the very interesting comments of the noble Lord, Lord Flight, about valuation policy and the impact that that is having on general investment by many companies.
The continuing unease and lack of confidence in pensions and savings has, of course, been exacerbated by the events surrounding the sale of BHS and the deficit in its DB pension scheme, which has highlighted, at the least, the problem of poor corporate behaviour. This helps to identify the more general issue of the performance of the Pension Regulator, its current powers and its willingness to deploy these. Much needs to be done to ensure that savers feel safe and confident in their pensions. As millions of people are enrolled in auto-pension schemes, clearly the regulation of master trust pension schemes is essential. In this context, the Opposition welcome the Bill—we support the need to protect members from suffering financial detriment and we support the imperative of promoting good governance and a level playing field for those in the sector—but it is clear from the debate that there are concerns as to whether the statutory and regulatory provisions in the Bill are sufficient. A number of very important questions have been put to the Government tonight which I have no doubt that the Minister will respond to.
Clearly, the number one issue is whether the scheme member protection proposed in the Bill is robust. In Committee we will seek to examine this in more detail. I thought that my noble friend Lady Drake raised some very important questions that we need to tackle, including the ongoing supervision of pension pots, where we lack sight of proposed regulations, the robustness of capital adequacy and questions on restrictions being placed on the level of dividends or profits, to name but three. My noble friend Lord McKenzie and the noble Baroness, Lady Altmann, also raised the question of master trusts which have already achieved accreditation under the MT assurance scheme developed with the Institute of Chartered Accountants. Clearly, what these master trusts have achieved under accreditation overlaps with some of the provisions in the Bill. It is important to know how any potential conflicts between the accreditation scheme and the proposed regulatory scheme will be resolved.
Turning to the ability of the Pensions Regulator to do the task that is being placed upon it, my noble friend Lord McKenzie made the point that the regulation of master trusts involves extensive powers and obligations, including: dealing with authorisation; determining fit and proper persons; judging financial sustainability; deciding on the adequacy of systems; and having the power to initiate triggering events. There is considerable work for the regulator, especially at the start of the scheme, when existing trusts will have to go through the authorisation process. The noble Baroness, Lady Wheatcroft, described the regulator as overemployed and understaffed and there is a real question about whether it is going to be in a position to carry out the duties the Bill lays on it. For example, Clause 7—the fit and proper person test—is a long clause but is actually very short on what is a fit and proper person. I hope the Minister might be able to help us on this when he winds up. By implication, I think the noble Lord, Lord Stoneham, probably agrees with me when I suggest that he does not look to the football league for advice on that point.
A common theme of the debate has been the silence in the Bill—and, indeed, in the Minister’s opening remarks—on the position of members. I am indebted to ShareAction for its work on this. Clause 11, on systems and processes, is silent on the need for the members’ voice to be heard or represented in master trusts. Why is that? I echo the suggestion made by the noble Lord, Lord Stoneham, that member representation is entirely consistent with the Prime Minister’s remarks about plc board membership. There are also significant gaps on members’ communications, as my noble friend Lady Drake emphasised. Why is there no requirement for trustees to notify members unless and until a decision is made to transfer out members’ rights on wind-up schemes? Why are savers not given the right to obtain on request standardised information about what they are being charged, where their money is invested and how ownership rights are exercised? Why are pension schemes not required to hold an annual meeting for their scheme members, even if it is a virtual meeting, as suggested by the noble Lord, Lord Stoneham? Why is Clause 31 so weak on protection of members following a pause order?
The Minister spoke helpfully and extensively about the use of delegated powers and explained the rationale for the extensive use of regulations. Like my noble friend Lady Drake, I understand the need for some flexibility here but the problem is that your Lordships’ powers in relation to secondary legislation are circumscribed. It is a great pity that draft regulations are not to be published because the Government want to consult with industry first. Surely there is no reason this could not be done in parallel between Second Reading and Committee. I note also that the Minister used the word “industry”. Can he assure me that that actually means stakeholders and that pension members and their representatives will also be consulted over the draft regulations? I am sure we will want to come back to this in Committee.
My noble friend Lord Monks referred to the forthcoming review of auto-enrolment and made some very interesting observations. I know it is early days yet but it would be helpful to have from the Minister some idea of what is in the Government’s mind in relation to that review. It is absolutely essential that consensus on auto-enrolment continues.
Finally, the Opposition welcome the Bill but there remain concerns about the regulatory regime proposed. Clearly, there are gaps in the detailed provisions of the Bill, with an unacceptable use of negative regulations. There seems to be a complete absence of any reference to the role and representation of members. Having said that, we look forward to a challenging and constructive Committee.